The DreamWorks Machine

It's early in the production of DreamWorks Animation's latest assault on the box office, Madagascar, and codirectors Tom McGrath and Eric Darnell have hit a snag. They're at a key moment in the first act when the main character, a neurotic New York lion named Alex, wanders into Grand Central Terminal and goes toe to toe with a little old lady. It's supposed to be a really funny scene, but it's missing a beat. So the directors call in Jeffrey Katzenberg for a bit of inspiration.

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The CEO settles into a chair next to McGrath in the DreamWorks LA office while Darnell looks on from the other end of a proprietary collaboration system 400 miles north at the company's Redwood City studio. McGrath fires up the scene on identical monitors in each location. The granny slams Alex's oversize head with her purse, stunning the lion, and shuffles away to catch her train. The directors eye each other nervously via huge hi-def screens and then turn to the boss. "It's great," Katzenberg says, "but what I think you need to do is have her kick him in the nuts."

In the nuts! Of course! The directors insert a few more whacks on the head, a gratuitous karate flip, and the coup de grace, a blow to the crotch. Alex buckles over, pleading for mercy in a high-pitched voice. Another memorable cinematic moment courtesy of Jeffrey Katzenberg, coming soon to a theater near you.

Starting with Madagascar, which opens May 27, DreamWorks is launching an onslaught of movies sure to be chock-full of more kicks in the nuts, thinly veiled innuendos, and other Katzenberg-style schtick. With as many as a dozen features planned for release over the next five years – two films per year through 2007 and then an annual video title as well – the company is out to grab the animation crown from rival Pixar and claim the legacy of Katzenberg's alma mater, the Walt Disney Company. It's an unheard-of pace in one of Hollywood's most labor-intensive markets. Between 1989 and 1994, Walt Disney Studios released only four major animated titles: The Lion King, Beauty and the Beast, Aladdin, and The Little Mermaid. Pixar aims for one feature film every 18 months.

To prepare for the offensive, Katzenberg has fashioned his company into a multinational assembly line of directors, producers, animators, and partner studios all connected into DreamWorks's new facilities in the LA suburb of Glendale. Which is to say that DreamWorks is a lot more than just a collection of workstations. It's a distributed animation platform that can handle the production of as many as 10 films at any one time, each requiring up to 30 terabytes of storage. Once edits are saved into the main drives, anyone with access can pull up a saved file from Glendale or Redwood City in a matter of minutes. With 10 weeks left in the production of Madagascar, the setup enabled the directors to create entirely new scenes featuring a lemur voiced by Ali G. They also called in one of the film's stars, Chris Rock, to read 12 new lines. In the hand-drawn days, those types of alterations took six months to pull off.

This industrial-scale approach, which DreamWorks calls just-in-time animation, offers more than just speed. It saves the company bundles of money and offers additional flexibility. DreamWorks has moved away from its costly Silicon Graphics systems in favor of less expensive Linux-based rendering units, workhorses that take animation commands during the workday and process them into art after dark. With cheap and plentiful computing power, DreamWorks can explore any idea that Katzenberg thinks will put butts in the seats. For example, Madagascar may just now be hitting theaters, but there are two more story lines in the film that could develop into sequels, plus the possibility of a third, starring the film's band of scene-stealing penguins.

Katzenberg hopes to serialize Madagascar in the model of the DreamWorks blockbuster Shrek, the ninth-most successful movie franchise in history. Shrek 2 followed on the momentum of the original to become the highest-grossing animated film in history. Shrek 3 is scheduled for release in 2007, followed by a direct-to-video title, Puss-in-Boots, based on the character introduced in Shrek 2, and, in 2010, Shrek 4. "People say that our eyes are bigger than our stomachs, and I know it all seems kind of Herculean," Katzenberg says. "Sure, no one has done it before. But I've always been this way. Show me the impossible and dare me to do it. Most of the time I will find a way."

Even before Katzenberg rolled out a relentless new schedule, DreamWorks Animation was hardly running at a sluggish pace. Between 1998 and 2004, the company grossed more than $2.6�billion worldwide at the box office, mainly on the strength of the Shrek franchise and Shark Tale. DreamWorks spends three to four years developing every movie, invests up to about $125�million, and generates an average of $293�million at the box office worldwide. And yet it's tough to think of the company as anything but an also-ran. That's because while DreamWorks has been good, Pixar has been perfect. Pixar may have taken three more years to produce three fewer movies, but its returns have been phenomenal. Since 1995, the Emeryville, California, company has generated more than $3.2 billion in ticket sales on a string of blockbusters: Toy Story; Toy Story 2; A Bug's Life; Monsters, Inc.; Finding Nemo; and The Incredibles. The six films averaged $539�million at the box office worldwide, nearly twice DreamWorks' take. With 425 fewer employees, Pixar has amassed a market cap of $5.5 billion – $1.6�billion more than DreamWorks.

Katzenberg is quick to express his admiration for Pixar – and also quick to point out that it was he who saved the studio from financial ruin by signing it to a distribution deal while he was at Disney. He speaks reverently of Pixar president Ed Catmull and his team of technologists and says that Pixar creative head John Lasseter has the storytelling ability and natural instincts of Walt Disney himself. But DreamWorks isn't trying to be Pixar. The two companies approach animation from opposite ends: art and finance. Or, it must be said: quality and quantity. If Lasseter is Disney, Katzenberg is P. T. Barnum.

"My origins in this business are not as an artist or a storyteller," Katzenberg says. "I grew up in the executive ranks. I'm an entrepreneur, and I have gone about the business of animation, which I love, from the place that I know."

The son of a stockbroker, Katzenberg dropped out of college in the '70s and landed his first job in the movie business as an assistant to Barry Diller at Paramount Pictures. Within seven years, he rose to become president of production under Michael Eisner. In 1984, the pair left to take over the ailing Walt Disney Studios, Eisner as chair and Katzenberg as studio chief. While at Paramount, Katzenberg had developed a reputation as a hands-on executive who could ferret out any script, track down and secure almost any talent, and pick out the story lines that rang up huge sales. In 1994, by the end of his tenure at Disney, he had increased the studio's annual revenue twenty-fold to $4.8 billion, generating nearly half of the parent company's revenue. Then, after 10 years on the job, Katzenberg was passed over for the vacant president position when then-president Frank Wells died. Furious at Eisner for the slight, Katzenberg fled the company in a rage and filed a $250�million lawsuit to recover his share of the billions generated by animated hits like The Lion King, Beauty and the Beast, and Aladdin. (Katzenberg settled out-of-court for an undisclosed sum.)

In 1994, Katzenberg founded DreamWorks SKG with Steven Spielberg and billionaire music mogul David Geffen. Initially Katzenberg was ambivalent about computer-generated animation, and the toon division struggled. In 1998, DreamWorks Animation unveiled the formulaic, hand-drawn The Prince of Egypt right around the same time it introduced its first CG film, Antz. Neither movie was terrible, but each fell well short of the $363 million that Pixar's second film, A�Bug's Life, grossed at the box office the same year. DreamWorks would release three more hand-drawn movies over the next five years, but with the release of Shrek in 2001, Katzenberg embraced pixels. And that's when DreamWorks started to hum.

With a legendary thirst for power, Katzenberg has developed DreamWorks into a high tech version of the old studio system, a centralized organization in which talent is kept under contract and often shuttled from project to project. While Pixar director Brad Bird got to follow his own vision for The Incredibles, DreamWorks offers less room for creative freedom. Katzenberg takes a producer credit (he's usually the executive producer) on nearly every movie and uses at least two directors on each project, sometimes four. He favors the talent he calls the "quiet giants" – directors and storyboard artists like McGrath, Darnell, Tim Johnson, and Conrad Vernon, people he says call the day-to-day shots on DreamWorks movies. "Do I think the world will ever see them as the equivalent of Brad Bird?" Katzenberg asks after viewing the director extras on The Incredibles DVD. "No, but there are other ways of doing things. They just don't have the same ego Brad has."

The studio farms out animation duties around the world to 1,000 staff and contract animators, 80 storyboard artists, 25 directors, and 20 producers, all spread across four facilities on three continents. This gang-tackle approach to every project spreads the workload, divides the credit, and has the handy benefit of keeping egos in check and costs down – all of which is good for business.

In the mid-'90s, when hand-drawn animation was all the rage, Katzenberg's Disney animators enjoyed lavish premieres for their films, which they arrived at by limousine. Back then, top animators earned upwards of $7,000 a week. Computerized animation has changed all that. Today, the average animator makes about $10,000 less a year than a decade ago, and almost no one pulls in more than $4,000 a week.

More crucially, animators say that CG animation makes it harder for them to become superstars. As production demands shift and some projects get fast-tracked and others delayed, DreamWorks readily moves help from title to title. Animators are often signed to contracts that bind them to at least two titles – but many get transferred from films that are moving along on schedule, like next year's Over the Hedge, to troubled projects such as Kung Fu Panda, which has been in development for more than three years and isn't due for release until 2008.

So far, Wall Street has smiled on the Katzenberg approach. Last year DreamWorks Animation pulled in $1.1 billion in revenue and raised another $635 million in an October IPO. Since the offering, the company has more than doubled in value to top $4 billion. To ensure that the success continues, Katzenberg finds it necessary to have his fingers in every DreamWorks production. A notorious workaholic, he schedules two breakfast meetings every day and has been known to travel constantly to keep up with far-flung projects. But as DreamWorks began evolving into a global company – inking a deal with British claymation boutique Aardman Animation to produce five stop-motion titles and signing the Hong Kong studio Imagi to produce Father of the Pride, an ill-fated attempt at a CG television series – Katzenberg simply couldn't keep up. The time came for him to loosen his grip.

Or virtualize it. Late in 2002, he gave his technology team six months to build a network that would bring all the projects to him. By the middle of 2003, DreamWorks was fitted for 21st-century moviemaking with its Virtual Studio Collaboration system bridging Glendale and Redwood City. Headed by Derek Chan, the team built a large conference room, two smaller video rooms, and a remote editing room at each site, linking the large rooms that McGrath and Darnell used to create Madagascar with a dedicated 30-Mbps fiber-optic line, and the smaller rooms with a 24-Mbps line.

The facilities are a work of design genius. The conference rooms are identical down to the maple furnishings and wall paneling, the swivel leather chairs, and the sliding storyboard panels. Chan's team tested 30 microphones to capture the broadest range of voice timbres and 70 fabrics to identify the color match that would make the remote collaborators seem most lifelike. The rooms have enough lumens to light a movie set and are outfitted with special light scoops to reduce shadowing and to keep participants from getting "raccoon eyes." Each room contains monitors and camera controls that allow people on both ends to work on the same files, view the same footage, or easily zoom in on a face, picture, or image.

The setup creates the illusion that distant collaborators are sitting at the same table. The staff now uses the rooms for everything from story pitches to performance reviews. "I remember when we wrapped animation on Madagascar," Darnell recalls. "We gathered everyone up here in Redwood City and they did the same in LA, and we had this party with cake and champagne; but for each group, half of the party was taking place virtually."

Two smaller rooms, each with wall-mounted monitors, allow animation crews, riggers, renderers, and other developers to collaborate on the nuances of a movie's trees, water, fur, or whatever other visual element needs tag-teaming. In the jungle scenes of Madagascar, animators had to deal with 1,300 different kinds of jungle plants and 4 million leaf movements. Each species of palm leaf had to react the same way to the same factors. The film also has several scenes with lemur crowds. To pull it off, the animators had to study the movement of lemur fur and re-create it consistently throughout the film.

The ability of DreamWorks talent to collaborate seamlessly has not only freed up Katzenberg's time, it has helped the company transition to a single animation platform. Shortly after its IPO, the company purchased the remaining interest in Pacific Data Images, the Redwood City animation firm behind Shark Tale and the upcoming Flushed Away, and began introducing Glendale animators to PDI's proprietary software. The use of a common platform allows animators to easily switch projects. Directors, in turn, can continually monitor the progress of several films. To speed the conversion process, animators in the north give long distance tutorials to the Glendale animators who have yet to make the switch.

The coolest piece of the whole arrangement – the part that got Steven Spielberg worked up when he first saw it – is the editing rooms. In the traditional editing process, the director sits in the back of the room, looking over the shoulders of the editors at the controls of the Avid machines as they slice a film's images down to the perfect cadence. It's a time-consuming process that requires a lot of back-and-forth, detailed, frame-by-frame explanation. But what happens if an expert on leaf movement in Redwood City can't make it to Glendale to help on a tricky sequence in a lush jungle scene? From the facility in Glendale, an animator or director can look Redwood City editors in the eye over one monitor and scribble on another to point out exactly where the problems are. Insiders say Spielberg now wants one for his home in the Hamptons.

With a head for numbers and an eye for packaging talent, Katzenberg has become the ultimate formula guy in the world's most formulaic industry. And there's one formula he's been trying to replicate for his entire career. "The Walt Disney Company recorded every single thing Walt Disney said, did, looked at, or imagined," he says, referring to journals of the master's work methods, management style, and creative process. "It's all there. I studied it. Walt Disney left breadcrumbs the size of Volkswagens, and you'd have to be deaf, dumb, and blind not to follow them down the path of making these movies."

Katzenberg may not possess the imagination that Walt Disney had, but from a management perspective, he's an awful lot like the old man. Disney, too, was involved in every element of his studio's movies and drove his animators hard. While he had a few animator stars, he relied more heavily on volume artists – mostly women – to do the bulk of the work at much lower wages. It was efficient and cost-effective, but it also led a group of disgruntled animators to defect to rivals.

Even by the standards of an industry run by megalomaniacs, Katzenberg is notorious for the way he drives his staff. "If you don't come in on Saturday, don't bother coming in Sunday," he once famously told his troops. One animator who worked for Katzenberg at both Disney and DreamWorks recalls seeing his boss's early notes on the original Shrek script – a sprawling mess of arrows, phrases, exclamation points, and commands marked up with a blue Sharpie. When Katzenberg handed it to the writers to redo, he told them, "Don't worry, you boys will thank me for this one day."

Then there was the time at Disney when the directors of Aladdin were given some freedom to reshape the main character, who Katzenberg felt was too busy trying to please his parents to be heroic. When they returned with their fix, he scrapped it completely. "I thought you were going to let us do it this way," they complained.

I thought you were going to save it, Katzenberg replied.

The inside joke at Disney was that Katzenberg would be much easier to work for once he'd had his first heart attack. Despite his taste for hot dogs, Diet Coke, and popcorn, it never happened.

Lately, there's been some evidence that Katzenberg is learning to ease up on the reins a bit. Aardman's lead director, Nick Park, whom Katzenberg likens to Bird, has a fair amount of creative freedom on the upcoming Wallace & Gromit: Curse of the Were Rabbit. Katzenberg has also signed comedian Jerry Seinfeld to write, produce, and star in a film about life in a bee colony. Still, Katzenberg's personal style and ambitious schedule often chafe his staff. "We've certainly lost our share of animators," says one DreamWorks insider.

One significant loss was animation supervisor James Baxter, a 17-year Katzenberg veteran with an impressive r�sum� of film credits: Who Framed Roger Rabbit, The Lion King, Sinbad, The Prince of Egypt, and Shrek�2. Before Baxter left in January to open his own animation company, he gave Katzenberg some feedback. Too many chiefs, Baxter said.

He added that DreamWorks suffers from creative confusion and that animators never have a feel for the ultimate direction of the movies they're working on. They have to constantly sift through a multitude of voices on every film – the directors, the producers, and, of course, Katzenberg and his head of production, Ann Daly, who is in constant debate with him about individual story lines, jokes, and characters.

Katzenberg thought about the dilemma and came up with the only solution that made sense to him. "You're right, I could see that happening," he said. "I�need to get more involved."

Robert La Franco (robertlafranco@mac.com) writes about media and technology in Los Angeles.